Budget Snippets: Where the money going
GDP growth target 7.2pc amid pandemic
The government has targeted a Gross Domestic Product (GDP) growth rate of 7.2 per cent for fiscal 2021-22 taking the post-Covid recovery situation into account. It had revised down the economic growth projection to 6.1 per cent for 2020-21, the second revision this fiscal year, reflecting the devastating impacts of the pandemic's second wave on a battered economy. The government had initially targeted an 8.2 per cent expansion in GDP but later reset the target to 7.4 per cent.
Per capita income rises to $2,227
Bangladesh's per capita income has risen by 7.9 per cent year-on-year to $2,227 in fiscal 2020-21 despite the devastating impacts of the coronavirus pandemic. It was $2,064 in FY2019-20. However, the latest per capita income figure is 4.25 per cent lower than the government's projection of $2,326 for FY20-21.
Forex reserves spurt to $45 billion
Foreign currency reserves have shot past $45 billion riding on higher remittance inflow, lower imports and moderate exports. Bangladesh started the fiscal year with $36.04 billion in the state coffer. On May 3, it reached a record high of $45.1 billion. The government hopes the reserves will touch $50 billion by Dec 2021. Remittance inflow to Bangladesh had increased by 40.1 per cent to $22.75 billion as of April.
NBR stares at missing target for second straight year
Revenue generation did not pick up as expected because of the economic slowdown. Receipts stood at Tk 195,672 crore in April, accounting for 65 per cent of the target set for the entire fiscal year. The target of revenue collection for FY2020-2021 was set at Tk 378,000 crore. The target was reduced by Tk 26,468 crore and re-fixed at Tk 351,532 crore. In FY2019-20, revenue collection posted its first negative growth in history.
Foreign aid in pipeline crosses $50b mark
Funds committed by the multilateral and bilateral development partners have shot past $50 billion on the back of growing support in the wake of the coronavirus pandemic and Bangladesh's inability to use the funds. The government had aimed to use $8 billion in foreign aid in FY20-21 but only managed to spend $4.8 billion as of April, forcing it to revise down the target to $7.4 billion.
Record black money whitened
Taxpayers legalised a record amount of assets worth Tk 14,295 crore in the first nine months of the outgoing fiscal year by showing their wealth in the form of cash, fixed deposit receipts, saving certificates and shares. The National Board of Revenue got Tk 1,439 crore in taxes for the year. Since independence, Tk 30,823 crore has been whitened, fetching about Tk 3,900 crore for the state coffer.
Poverty rate doubles
The poverty rate doubled as a massive number of people lost their jobs and incomes because of the coronavirus pandemic. In 2019, the population living below the poverty line was 20.5 per cent. The pandemic has since taken it to as high as 42 per cent, erasing the country's gains in poverty reduction in recent decades. However, the government did not provide an updated picture of the poverty rate for 2020.
LDC graduation pushed back by two years
Bangladesh was on track to graduate from the least developed countries (LDC) grouping in 2024 after having comfortably met all the required criteria. But with the coronavirus crisis continuing to wreak havoc, the government sought two more years from the United Nations for graduation as Bangladesh would lose many of its trade benefits and access to concessional loans during the transition period. The country will now graduate in 2026.
Investment drops as private sector's share declines
The government had projected that overall investment as a percentage of GDP would go up to 33.5 per cent in FY20-21. In the end though, it stood at 32.3 per cent because of the pandemic-induced economic slowdown. The public investment-to-GDP ratio rose to 8.2 per cent from 8.1 per cent but the private sector's share fell by 1.1 percentage points to 24.2 per cent.
Tax exemption for home appliances, agro-processing
A 10-year tax exemption has been proposed for the local producers of washing machines, microwave ovens, electric sewing machines, induction cookers, kitchen hoods, and kitchen knives in order to promote Made in Bangladesh" products. To promote value addition in agro-processing companies, the government proposed the same facility for fruits processing, vegetable processing, milk and its by-product production, and baby food production.
Corporate tax rate reduction
It was proposed that the corporate tax imposed on listed and non-listed companies, sans lenders, merchant banks, tobacco, and mobile network companies, be reduced by 2.5 percentage points. However, the corporate tax levied on listed mobile financial service (MFS) providers may soar by 5 percentage points. If the MFS provider is not listed, then a 7.5 per cent increase in corporate tax has been suggested.
Tax exemption for hardware producer, light engineering
A ten-year tax exemption has been proposed for the producers of computer components such as motherboards, casings, UPS, sound systems, USB cables, CCTVs, and pen drives. The proposed budget also suggested the same exemption for light engineering products. The light engineering sector produces machinery used in factories and their spare parts.